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DECISION No

DECISION No. 652/2001/QD-NHNN OF MAY 17, 2001 ISSUING THE REGULATION ON THE METHOD OF CALCULATING AND ACCOUNTING THE COLLECTED AND PAID INTERESTS OF THE STATE BANK AND CREDIT INSTITUTIONS

THE STATE BANK GOVERNOR

Pursuant to December 12, 1997 Law No. 01/1997/QH10 on the State Bank of Vietnam and December 12, 1997 Law No. 02/1997/QH10 on Credit Institutions;

Pursuant to the Government�s Decree No. 15/CP of March 2, 1993 on the tasks, powers and State management responsibilities of the ministries and ministerial-level agencies;

At the proposal of the director of the Accounting and Finance Department,

DECIDES:

Article 1.- To issue together with this Decision the Regulation on the method of calculating and accounting the collected and paid interests of the State Bank and credit institutions.

Article 2.- This Decision takes implementation effect as from July 1, 2001.

Article 3.- The director of the Office, the director of the Accounting and Finance Department and the heads of the units, of the State Bank, the directors of the State Bank�s branches in the provinces and centrally-run cities, the chairmen of the Managing Boards and the general directors (directors) of credit institutions shall have to implement this Decision.

For the State Bank Governor

Deputy Governor
NGUYEN THI KIM PHUNG

REGULATION ON THE METHOD OF CALCULATING AND ACCOUNTING THE COLLECTED AND PAID INTERESTS OF THE STATE BANK AND CREDIT INSTITUTIONS

(Issued together with Decision No. 652/2001/QD-NHNN of May 17, 2001 of the State Bank Governor)

Chapter I:

GENERAL PROVISIONS

Article 1.- Scope of regulation

This Regulation prescribes the method of calculating and accounting the collected and paid interests arising in the operation of the State Bank and credit institutions operating in Vietnam.

Article 2.- Interpretation of terms

In this Regulation, the following terms are construed as follows:

1. Interest means a money sum paid by the borrower, capital mobilizer or lessee to the lender, security investor, depositor or lessor for the use of borrowed capital, mobilized capital or leased assets. Interest is calculated on the basis of the capital amount, capital use time and interest rate.

2. Accounting of estimated revenue means the periodical calculation and accounting of the interests receivable at a given time in future (receivable interests) into the income account, regardless of the fact that such interests have not yet been collected at the time of calculation and accounting.

3. Accounting of estimated expenditure means the periodical calculation and gradual accounting of the interests payable at a given time in future into the expenditure account, regardless of the fact that such interests have not yet been paid at the time of calculation and accounting.

4. Accounting of actual revenue - actual expenditure means the accounting of the money amounts actually collected or paid into the revenue or expenditure account.

5. Distribution accounting means the calculation and gradual transfer (distribution) of pre-collected or prepaid interests in each period into the revenue or expenditure account.

Article 3.- General principles for the calculation of collected and paid interests of the State Bank and credit institutions for customers

1. The calculation of collected or paid interests shall depend on the form of capital mobilization and the form of lending or investment prescribed by the State Bank and credit institutions or agreed with their customers (if any). There are three ways of calculating the collected or paid interests:

a/ Periodical calculation of collected or paid interests;

b/ Calculation of pre-collected or prepaid interests;

c/ Calculation of post-collected or postpaid interests.

2. In a number of special cases, the calculation of collected or paid interests shall be as follows:

a/ For borrowed amounts for which there have been debt-freezing decisions of competent authorities, the interest arising in the debt-freezing duration (from the date the debt is frozen till the expiry of the freezing duration or till the time the borrowed amounts are dealt with) shall not be calculated and collected.

b/ If the borrowing customer is an enterprise which goes bankrupt, is dissolved, divided, separated, merged, consolidated or put for assignment, sale or business contracting under decisions of competent State bodies, the calculation of collected or paid interests shall comply with the relevant current law provisions.

c/ If the borrowing customer is an individual who is dead or declared by court to be missing or dead and has no heir to pay for his/her debt, the calculation of the lending interest shall cease from the date the administration of the locality where the customer resides certifies that the customer is dead or from the date the decision of the court declaring such customer to be missing or dead, takes legal effect.

d/ Where the borrowing customers still have overdue debts, the State Bank and credit institutions shall first collect the principals and then interests thereon in full when the customers have money.

Article 4.- The State Bank shall apply the method of accounting of actual revenue - actual expenditure with regard to collected or paid interests arising in its operation.

Article 5.- Credit institutions shall have to determine and take responsibility for the application of the method of calculating and accounting collected and paid interests (the methods of estimated revenue; estimated expenditure; actual revenue - actual expenditure; and distribution) arising in their operations in compliance with the current financial regimes and the mechanisms of capital mobilization, credit activities and other related professional activities.

Article 6.- Periodical calculation and accounting of collected and paid interests, applicable to credit institutions

Credit institutions shall prescribe the periodical calculation and accounting of collected and paid interests suitable to their operation characteristics and management requirements but must ensure that all the interest amounts estimated to be collected and paid, actually collected and actually paid, and distributed, be fully and accurately accounted into their income or expenditure accounts by the last month of each quarter or the end of the fiscal year.

Article 7.- The State Bank and credit institutions shall have to make all valid and lawful vouchers; calculate and account in a timely and accurate manner the collected and paid interests, and have the responsibility to inform customers of their debits or credits according to current regulations.

Article 8.- For interests collected or paid in foreign currencies, the State Bank and credit institutions shall collect or pay such interests in the kinds of foreign currencies already mobilized, lent or invested. Where they collect or pay interests in a different foreign currency or in Vietnam dong, the agreements between the State Bank or credit institutions and customers shall apply in accordance with current law provisions on foreign exchange management.

Article 9.- Elements for calculation of interests on deposits or loans

Interests on deposits or loans shall be calculated on the basis of the following elements:

1. Interest rate: To be based on the specific interest rate applicable to each round of capital mobilization or type of loans inscribed in the deposit books or credit contracts;

2. Money amount: The amount to be used as basis for calculation of the interest thereon is the amount actually mobilized from the customer or actually lent to the customer:

a/ For cases of interest calculation by the method of accumulated amount: The amount for interest calculation is determined on the basis of the actual number of days of the Credit balance on the deposit account or the actual number of days of the Debit balance on the loan account for each day in the month. For days-off (holidays, weekends), the last balance of the working day preceding such days shall be used.

b/ For cases of interest calculation in sum: To be based on the money amount (principal) deposited or for debt payment.

3. Time: The time for calculation of deposit or loan interests may be in day, month, quarter, year or, for some type, in hour.

The standard time for interest calculation in year, month, day or hour is conventionalized as follows:

+ One year has 360 days;

+ One year has 12 months;

+ One month has 30 days, (regardless of whether the month has 28, 29, 30 or 31 days)

+ One day is 24 hours.

a/ If the day of interest collection or payment coincides with a holiday or weekend day, it shall be changed to the subsequent working day.

b/ For deposits or loans with a term of one day or more, the interest calculation duration shall be counted from the day of depositing or borrowing and exclude the day of money withdrawal or debt payment.

Chapter II

SPECIFIC PROVISIONS

Article 10.- Interest calculation methods

There are two methods of interest calculation:

- Calculation in accumulated amount

- Calculation in sum

1. Calculation in accumulated amount: This method applies to short-term loans, payment deposits and demand deposits. The interest calculation is made on the last days of the month (to be specified by each bank) by multiplying (x) the whole month�s accumulated amount by the monthly interest rate then dividing (: ) by 30 days according to the following formula:

The month�s accumulated Interest

amount for x rate

The interest calculation (monthly)

interest = ��������������������

amount 30 days

of which:

The month�s ( The The actual )

accumulated ( Debit number of days )

amount for = S ( balance x of Debit or )

interest ( or Credit Credit balance )

calculation ( balance in the month )

2. Calculation in sum: This method applies to term deposits or short-, medium-, and long-term loans in sum as agreed upon when lending. The interest calculation in sum must be based on the deposited amounts or the debt payment amounts, the money-depositing or loan use duration and the specific interest rate applicable to the money-depositing or -borrowing duration. The calculation formula is as follows:

The The

deposited The interest rate

The amount depositing applicable

interest = or the debt x or x to the

amount payment borrowing depositing or

amount duration borrowing

duration

The interest rate applicable to the depositing or borrowing duration shall be set or agreed upon by the State Bank or credit institutions and customers according to current regulations, including:

+ Yearly interest rate;

+ Monthly interest rate;

+ Daily interest rate;

+ Hourly interest rate.

Article 11.- Elements for calculation of interests on overdue debts

1. The time of transfer to overdue debts: To be counted from the day following the day the debt is due (if the debt term is not extended or the debt payment period is not adjusted) as inscribed in the credit contract.

2. The overdue debt interest rate: To be calculated according to current regulations.

3. The overdue debt amount: is the balance on the overdue Debit account.

Article 12.- Control of calculation of collected or paid interests

The controllers (chief accountants or heads of accounting sections or authorized persons) shall have to compare and check the interest calculation elements:

+ Interest rate;

+ Amount for interest calculation;

+ Duration for interest calculation;

+ The applied calculation method;

+ The accuracy, validity and legality of interest collection or payment vouchers already made.

2. On the interest collection or payment vouchers handed over to customers there must be signatures of the chief accountant or the head of the accounting section; and the general director (director) or the authorized person.

Article 13.- Accounting of collected interests

1. Accounting of collected interests by the method of actual revenue - actual expenditure: When collecting interests, the State Bank and credit institutions shall account them in:

Account Debit: Relevant amounts (cash, customers� deposits�.)

Account Credit: Relevant collected interests (collected interests on deposits, collected interests on loans�)

2. Accounting of collected interests by the method of distribution:

- When pre-collecting interests, credit institutions shall account them in:

Account Debit: Relevant amounts The

(cash, customers� deposits�) whole

Account Credit: Other payable amounts pre-

(detailed accounts: Pre-collected deposit collected

interests for future distribution; interest

pre-collected loan interests for future amount

distribution �)

- Periodically, credit institutions shall calculate and distribute gradually into their incomes, and account them in:

Account Debit: Other payable amounts (the above-said detailed accounts)

Account Credit: Relevant collected interests (collected interests on deposits, collected interests on loans�)

- If there is a provision or agreement on the refund by the credit institutions to the customers of the difference between the pre-collected interest amount and the actually-arising interest amount (for the customers pay the loans before schedule, etc�), when this case occurs, the credit institutions shall account such difference in:

Account Debit: Other payable Amount of

amounts (the above-said detailed interests

accounts) refunded by

Account Credit: Relevant amounts credit institutions

(cash, customers� deposits�) to customers

3. Accounting of collected interests by the method of estimated revenue:

- Periodically, credit institutions shall calculate the interest amounts to be collected in the period and account them in:

Account Debit: Relevant accumulated Interest

interests estimated to be collected amount

(accumulated interests estimated to be to be

collected on deposits; accumulated interests collected

estimated to be collected on loans�) in the

Account Credit: Relevant collected period

interests

- When the time for interest collection is due and the interests have been collected, credit institutions shall account them in:

Account Debit: Relevant amounts Interest

(cash, customers� deposits�) amount

Account Credit: Relevant accumulated already

interests estimated to be collected collected

4. For the receivable interests already accounted as incomes but then recorded as decreased revenue according to the prescribed regime, credit institutions shall account them as follows:

Account Debit: Relevant collected Interest

interests amount

Account Credit: Relevant accumulated not yet

interests estimated to be collected collected

At the same time, credit institutions shall account them for off-balance sheet monitoring:

Account entry - Interests not yet collected - Interest amount not yet collected.

Article 14.- Accounting of paid interests

1. Accounting of paid interests by the method of actual revenue - actual expenditure: When paying interests, the State Bank and credit institutions shall account them in:

Account Debit: Relevant paid interests (interests paid on deposits, on loans�)

Account Credit: Relevant amounts (cash, customers� deposits�)

2. Accounting of paid interests by the method of distribution:

- When prepaying interests, credit institutions shall account them in:

Account Debit: Expenses for future Whole

distribution (detailed accounts of each interest

type: prepaid interests on deposits, amount

prepaid interests on loans�) already

Account Credit: Relevant amounts prepaid

(cash, customers� deposits)

- Periodically, credit institutions shall calculate and gradually distribute the amount of interests already prepaid into their expenditure and account them in:

Account Debit: Relevant paid interests

Account Credit: Expenditure for future distribution (the above-said detailed accounts)

- If there is a provision or agreement on the recovery by credit institutions of the difference between the prepaid interest amount and the actually-paid interest amount (for the customers withdraw deposits before schedule, etc�), when this case occurs, credit institutions shall account such difference in:

Account Debit: Relevant amounts Amount of

(cash, customers� deposits�) interests returned

Account Credit: Expenditure for by customers

future distribution (the above- to credit

said detailed accounts) institutions

3. Accounting of paid interests by the method of estimated expenditure:

- Periodically, credit institutions shall calculate the interest amounts payable in the period and account them in:

Account Debit: Relevant paid interests (paid Interest

interests on deposits, paid interests on loans,�) amount

Account Credit: Relevant accumulated interest amount payable

estimated to be payable (accumulated interest amount in the

estimated to be payable on deposits; accumulated period

interest amount estimated to be payable on loans�)

- When the interest payment time is due and the interests have been paid to the recipients, credit institutions shall account them in:

Account Debit: Relevant accumulated Interest amount

interest amount estimated to be payable already paid to

Account Credit: Relevant amounts customers

(cash, customers� deposits�)

4. Where the payable interest amount has been accounted as expenditure but then it is no longer required to be paid or is exempt or reduced according to regulations, credit institutions shall handle and account them in:

Account Debit: Relevant accumulated interest Interest

amount estimated to be payable (accumulated amount

interest amount estimated to be payable not

on deposits, accumulated interest amount required

estimated to be payable on loans�) to be

Account Credit: Relevant paid interests paid

Chapter III

IMPLEMENTATION PROVISIONS

Article 15.- The supplement and amendment to this Regulation shall be decided by the State Bank Governor

For the State Bank Governor

Deputy Governor
NGUYEN THI KIM PHUNG